In between the sideshow arguments, there seems to be some significant support (poly and others) for the flat tax rate based on “simplicity” and “fairness”.
Its also clear that the proposal in the OP’s report is unworkable due to the immediate £50 billion increase in the deficit. However, it will take far more than a 1.4% change to the rate to avoid this massive deficit.
However, if the principle of the “flat rate” is better, why not introduce it at a rate that doesn’t produce the instant £50 billion deficit and therefore make it economically viable. This could be 40%, or even 50%, but it could be reduced in the future once the system has succeeded and the deficit that we already have (over £100billion per year) has been reduced. Obviously the base threshold would need to be raised to prevent an increased tax burden falling on the poorest in society.
How about a £18,000 tax allowance for everyone, with flat rate tax at 40% above that?
Or 50% flat rate tax, with a threshold allowance of £20k ?

Even the second option would only increase the tax bill for those earning over about £55k per year. Most people would benefit.

By my very rough calculations 😉 that should help prevent the £50 billion deficit, whilst still implementing the desired simplicity and fairness and combined with closing of the evasion/avoidance loopholes and reduction of the actual cost to collect the tax.
If it works, reduce the rate in 15 years.

*sticks head in*

This still going on then? Okay I’ll answer some of the points made to me now TJ has managed to expand his argument:

I have no idea what you mean by this. You stated that taxpayers in the high rate (40%) tax band are the top 10% wealthiest in the country and are automatically regarded as “rich”.

I simply pointed out that they are actually (almost) the top 10% individual earners in the country. That doesn’t mean they are “rich”.

You have to consider the number of dependants they have at home. Which is why the government, the IFS and poverty action groups all use household income, not individual income as a measure of relative poverty/wealth.

First sentence correct. Second sentence incorrect.
You can, as I have shown repeatedly, be earning in the higher tax bracket and still have a household income that puts you way below the average in the UK.

Your relatively high individual earnings mean nothing if you’ve got 10 mouths to feed at home.

I use household income because that is how “wealth” is measured by the government and poverty groups.

If you only consider individual income, as TJ does, then you classify a household with one high earner and 8 dependants to feed and clothe as “rich”, while next door a household with two average earners and no dependants is “average” – despite the fact that the second household has considerably more actual cash than the first one.

Bizarrely I think you believe I am somehow “right wing” for trying to properly define “wealth” and correctly identify those without.

The £42000 was your own figure from this statement: “if you earn £42000 plus yo are one of the wealthiest people in the country – top 10% or so.”

Higher rate (40%) tax starts at £35k taxable income for 2012 + a personal allowance of £7,475 gives ~£42k

Didn’t they stop them for higher rate tax payers?

I know that people earning 42k+ can be well off. And I willingly concede that most probably are. But it very much depends on personal circumstances. An “average” couple on average wages can easily out earn a single 42k+er. A 42k+er can live in a household with well below average income.

Calling all 42kers “rich” regardless of household circumstances is very misleading.

Incidentally, I saw recently that there are now 4.1 million higher rate tax payers. Nearly 1-in-7 of all taxpayers.

See Junky – you get so close to hammering one home, then go and spanner it over the bar:

‘Currently residing’? rather than ‘living in’?

Does that say where he is permanently resident for Tax purposes?

how many homes do you think Rod Stewart owns?

Epping
Los Angeles
Palm Beach
Southern France

the fact that he’s ‘currently residing’ in Epping says nothing – because when he goes to another one of his houses, he’s ‘currently residing’ there, isn’t he!

but the fact that he’s able to tailor the amount of time he spends at each of his houses to avoid excessive tax bills, proves the point that if you tax people too much, they will go somewhere else – hell, one visit to Monaco proves the Laffer curve.

Tell you what, Lets put it in his own words:

“I was a real little Red when I was 19,” said Rod “Earn a few bob and it all changes though, dunnit?” He told Melody Maker in 1974, when Labour had pushed income tax rates to their highest since the war: “The Government thinks it’ll tax us bastards right up to the hilt because we won’t leave, but that’s wrong because I will if I want to … with a 90 per cent tax ceiling, it’s just not worth living in England any more.”

There you go – the laffer curve in one easy lesson!

The state Europe is in at the moment I can’t see anything like that ever happening.

This would be good though. As would generally shutting all the loopholes properly. Tax only stands a chance of being “fair” if everyone pays what they are meant to rather than finding ways to avoid it.

(But then, how many of us happily avoid Duty on imported bike parts? Cameras? etc)

glitchybump?

thought binners intervention would be worth seeing 🙂

How so? They might have more to spend it on but they still don’t have below average income surely? And having lots of kids is a personal decision surely? Like deciding to have a lot of cars or boats. 😉

There you go – the laffer curve in one easy lesson!

Yeah, talking about 90% tax rates.

Ah ok hadn’t read the whole thread. but note that Rod is basically saying ‘I used to have principles, then I got rich and they went out of the window and self interest took over’.

‘I used to have principles, then I got rich and they went out of the window and self interest took over’.

GOT IT !.

Grum.
You are Jesus.

😯 Again? Okay.

42kpa means a net wage of £30,922m pa.

Whack that figure into the IFS Where Do You Fit In calculator[/url] with a family consisting of 2 adults, 3 teenage kids (14-18), living in a below average council tax area of £1500pa.

Result: 3rd decile. Around 24% on the UK “wealth” scale.

same person but now with a partner and 10 kids

Its not comparing like with like though and I forgot to take off tax and canno tbe bothered to re do.

So we now all know that kids are expensive
I still think you both have a point and are saying different things
i am happy to debate which is the better measure [ not really I am doing what Binners said]

I look more like Jesus than he looks like God

Hadn’t read the whole thread, sorry. 😳

Still not entirely convinced by the premise though, as it is a bit like saying some people aren’t as well off as they seem despite high earnings because they have an enormous fine wine bill to pay every year (can you tell I’m not a parent?). 🙂

I’m more like Buddha. JY is sort of like the vegan Scots/Bolton version of Jesus.

grum wins but nice work all 😀

I am pretty sure you have just proved that £52,400 in indeed more than £42,000.

I am genuinely not sure what I think of this approach of comparing an individual with a group, we could do it for ever.
What about pets they cost, do we count them?
We still have the same money so i am not sure we can actually say one is richer than the other because one has more outgoings that they willing took on though of course I can see that view point.

* we could imagine a millionaire with expensive golf membership, expensive car depreciating hugely and a huge house arguable being worse of [ after fixed costs] tham someone on average wage living at home with their parents. I am not sure it would be true just because they have the most disposable income they are the richest…interesting debate about viewpoints as both can be creditable and I am still not sure which is the “best”.

Teamhurtmore still waffling on about the laffer curve?
this is a classic THM arguement. take a theory espoused by right wing accept this unproven theory as fact than argue from this “fact”

There are a large number of reputable economists who do not believe in the laffer curve, there is a lot of data disproving it, there is no decent data proving it.

Its an unproven theory at best.

Like all economics there will be two different views at least on every aspect. However the laffer curve believers are not on the mainstream thinking unless like THM you believe that the rightwing neoliberal view is the mainsteam

So what was JMK saying then? And why does JMK/HRMC/any economist understand the concept of elasticity, but you refute it? And read carefully, the whole point of reading what Keynes said (probably the most incorrectly quoted economists of all time) is to show that you don’t even have to mention Laffer. All you need to understand is elasticity. But every time, you are backed up by a straight forward fact – the same response. Funny that?

The only mention I have made of the Laffer Curve is the fact that HRMC use it and Keynes understood the principle before the label was applied. But does this make Keynes a rightwing neoliberal as well? We should form a club. Any part of that incorrect, or stay with the bully boy tactics?

Edit – thank you JY, glad the link was useful. Not really very precise though any of this is it? Did you note all the quoted analysis in that report. So much for no evidence?

So I am shopkeeper X selling product Y. I put the price of Y up – do I make more or less money?

of course not its the internet I stole a quote and used it to look wise but shh I think I got away with it 😉
I would repeat
The laffer curve does not state that all and any tax cut will always result in more money being generated.

how is my A level economics from 25 years ago holding up

FWIW there is apoint at the extremes but it should not be [mis]used to suggest all tax cuts leads to more money because it does not say that.

JY – its holding up better now. Come and take the paper this week. A* guaranteed!! 😉